【May 2015】
☞ The following tax information is translated from Korean for foreign-invested companies, and is not legally binding.
(Q) If a foreigner is invited to Korea to serve as the principal of an authorized education institute and provides the service of overseeing school administration and operations, is the payment for such service subject to income tax exemption?
(A) If the foreigner is a U.S. resident and he/she is invited to Korea to serve as the principal of an education institute established based on the Special Act on Establishment and Management of Foreign Educational Institutions in Free Economic Zones and Jeju Free International City and provides the service of overseeing general administration and operations of the school, the payment for such service is not subject to income tax exemption under Article 20 of the United States-Republic of Korea Income Tax Convention (Letter Tax Ruling Division-1247, National Tax Service, Nov. 28, 2014)
※ Qualifications for earned income tax exemption for foreign teachers (professors)
Country |
Article* |
Qualification (All requirements should be met) |
Tax Benefit |
U.S. |
20 |
①Inviting organization: Government, local public organizations, authorized educational institutions
②Purpose of invitation: Teaching or research at universities or other authorized educational institutions
③Purpose of visit: Primarily the same as the purpose of invitation
④Period of visit: Two years or less |
Earned income tax exemption for a period not exceeding two years from the date of arrival in Korea |
Canada |
|
No earned income tax exemption clauses in the tax treaty |
|
U.K. |
20 |
①Purpose of invitation: Teaching or research at universities, colleges, schools or other educational institutions recognized as a non-profit organization by the government
②Period of visit: Two years or less
③Taxation: Under the tax treaty, earned income tax exempted in Korea is taxed in the U.K. and earned income tax exempted or deducted in the U.K. is taxed in Korea. |
Earned income tax exemption for a period not exceeding two years from the date of arrival in Korea |
Republic of South
Africa |
21 |
①Inviting organization: Teaching or research at universities, colleges, schools or other educational institutions recognized as a non-profit organization by the government
②Period of visit: N/A
③Purpose of visit: Limited to teaching or research at the inviting organization |
Earned income tax exemption for a period not exceeding two years from the date of arrival in Korea |
New Zealand |
21 |
①Inviting organization: Universities, colleges, schools, or other educational institutions authorized by the competent authority in Korea
② Purpose of visit: Limited to teaching or research at the inviting organization
③Period of visit: Two years or less |
Earned income tax exemption |
Australia |
20 |
①Inviting organization: Universities, colleges, schools or other authorized educational institutions
②Purpose of visit: Limited to teaching or research at the inviting organization
③Period of visit: Two years or less |
Earned income tax exemption |
Ireland |
21 |
①Teaching or advancement study (including research) at universities, colleges, authorized research institutions, or other institutions for higher education
②Period of visit: Two years or less |
Earned income tax exemption for a period not exceeding two years from the date of arrival in Korea |
Germany |
20 |
①Inviting organization: Government, universities, colleges, schools, museums or other cultural institutions
②Purpose of visit : Teaching or research at the inviting organization
③Period of visit: Two years or less
④Payment of remuneration: To be paid outside Korea |
Earned income tax exemption |
* Article of the Tax Treaty with Korea
※ The taxpayer should have been a resident of a country that has a tax treaty with Korea before entering Korea and should prove his/her residency by submitting a certificate of residence.
(Q) The philippines branch of a domestic firm paid tax (branch tax) for remittance of accumulated profit to Korea. In this case, is the tax subject to foreign tax credit?
(A) If the Philippines branch of the domestic firm paid 10 percent of the remitted profit as tax in accordance with Article 5 of the Philippines-Korea Tax Treaty and the tax law of the Philippines, the tax amount can be deducted as foreign tax payment of the business year in which the remitted profit sourced from the Philippine branch is included in the tax base for the Korean firm, under Article 57 of the Corporate Tax Act and Article 94 of the Enforcement Decree of the Act. (Letter Tax Ruling Division-1323, National Tax Service, Dec. 16, 2014)
☞ For more information, please contact the International Tax Resource Management Office of the National Tax Service (82-44-204-2888~90).
